Toyota Motor Corp. lowered its yearly production target by half a million vehicles on Wednesday due to a semiconductor shortage and Covid-19 sick leave.

The world’s largest manufacturer said it will construct 8.5 million vehicles in the year to March 31, down from a previous estimate of 9 million, as it reported a 21 per cent drop in operating profit for the three months to December 31.

“We don’t expect the imbalance in chip supplies to resolve quickly and the course of coronavirus pandemic is unclear,” a Toyota official told reporters. “We think that uncertainty will continue into the next business year,” he added.

Toyota, like other major global automakers, has been forced to restrict production as the Covid-19 outbreak wreaks havoc on global supply chains. Toyota projected to construct 9.3 million vehicles globally at the start of its fiscal year. As a result, it has been compelled to lower expenditures in order to increase profit per vehicle.

Strong demand in important regions such as China, the United States, and Europe has aided the attempt to increase margins, allowing the company to boost prices and reduce the incentives it offers to attract customers.

The corporation also benefits from a weaker yen, which boosts the value of overseas earnings in yen.

Toyota’s full-year profit prediction of 2.8 trillion yen ($24.3 billion) remained unchanged. Refinitiv data reveals that this projection is lower than a mean profit of 3.04 trillion yen based on forecasts from 27 analysts.

According to Refinitiv data, its operating profit of 784.4 billion yen in the third quarter was better than the average prediction of 716.8 billion yen based on the estimates of nine analysts.

(Adapted from Reuters.com)